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Samsung, Olympus mull alliance - source

Jan 12 2012 11:49

Reuters

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Seoul - Samsung Electronics is open to forging an alliance
with Japan’s troubled Olympus, potentially joining other electronics firms in
circling one of the world’s biggest names in medical equipment, sources said.

Samsung’s major Japanese rivals, Sony and Panasonic, have
already shown interest in Olympus, now in need of capital after being swamped
by a $1.7bn accounting scandal over the past three months, sources in Tokyo
have told Reuters.

Olympus is best known for cameras but makes most of its
money in healthcare, dominating the market for gastro-intestinal endoscopes
which are seen as the kind of high-tech, profitable and stable business electronics firms would covet.

Samsung has ruled out any interest in Olympus’ loss-making
camera business, but a company source said on Thursday that it might consider
an alliance with Olympus in other areas.

“We are open to the possibility of an alliance with
Olympus,” the source with knowledge of the matter said on condition of
anonymity, without elaborating.

Earlier, the Asahi Shimbun newspaper reported that Olympus
was scouting out the electronics industry for a friendly investor to take a
minority stake in the company, and that Olympus had drawn up a short list of
five potential partners.

The daily, quoting unnamed sources, listed them as Samsung,
Sony, Panasonic, Japanese medical equipment firm Terumo, which already
has a small stake in Olympus, and endoscope rival Fujifilm Holdings.

Olympus turned almost overnight from a venerable blue chip
to an investor’s nightmare in October, when it fired its British chief
executive, Michael Woodford, who then went public with his concerns about the
firm’s dubious bookkeeping.

It has since lost about 40% of its share price - though it
has recovered from an 80% sell-off at one stage - and its management is
in disgrace after the firm was found to have hidden losses from investors for
13 years.

Its plight is a potential opportunity for the electronics
industry, which has been pushing into healthcare.

A Samsung Electronics spokesperson said on Thursday it had
not received a detailed offer from Olympus regarding a tie-up.

Samsung has targeted healthcare for growth as it diversifies
away from businesses where it commands leading positions such as electric
components, cellphones and TVs. It has said it will aggressively pursue
investments and acquisitions in new areas such as healthcare and renewable
energy. Samsung Galaxy S3

In November, it bought US cardiac testing firm Nexus, its
second healthcare acquisition last year.

Olympus looks to raise up to $1.3bn - Asahi

The Asahi said Olympus planned to decide on a tie-up as soon
as next month and was looking to raise up to about ¥100bn in new equity,
although it was unclear if either Olympus or its major owners were in talks
with any of the short-listed five.

Olympus, responding to the Asahi report, said only that it
was considering various reform options and nothing was decided.

Sony, Panasonic and Fujifilm have already been examining the
scope and timing of a possible equity stake in Olympus, sources familiar with
the matter have said. All three firms are keen on the lucrative medical
equipment sector.

Any Olympus-Fujifilm deal, however, would face tough
scrutiny from Japan’s anti-monopoly watchdog given the two would have a
combined market share of more than 80% in flexible diagnostic endoscopes, used
to look inside patients to check for intestinal cancers and other diseases.

The Asahi report sent shares in Olympus climbing as much as
6%, recovering further from the depths of a crisis.

The stock closed up 3.25% at ¥1 270, valuing Olympus at
around $4.35bn.

Sony, Fujifilm and Terumo declined comment on Thursday,
though Sony boss Howard Stringer had said this week the Olympus situation was
still evolving and he could not comment.

“That situation isn’t far enough along for me to comment
on,” he told reporters at the Consumer Electronics Show in Las Vegas.

“We have a relationship with Olympus, have had a
relationship because we make components for Olympus. We haven’t marched forward
in that particular area. It’s a little confusing.”

A Panasonic official said on Thursday: “We are not
considering a capital tie-up at this point.”

Panasonic’s comment has failed to extinguish talk in Japan
that it might yet take a stake in Olympus, once the disgraced firm has finally
put the accounting scandal behind it.

Panasonic president Fumio Ohtsubo, also speaking at the Las
Vegas event earlier this week, had said: “The situation is unclear, so we
aren’t doing anything at this time.”

Having recently restated its accounts, Olympus is left
highly geared and in need of fresh capital. It remains under investigation by
police, prosecutors and regulators.

It is also in the extraordinary position of being run by a
board of directors of whom more than half are being sued by Olympus for
mismanagement. The current board, however, plans to resign and usher in a new
board by March or April.

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